Govt to pay more for paddy

The government on Thursday raised procurement price for paddy for the upcoming winter crop to Rs 850 per quintal. It also decided to ask the Prime Minister’s Economic Advisory Council (EAC) to examine recommendations to substantially raise government procurement prices for the kharif crop.

The report of the Commission for Agricultural Costs and Prices (CACP) — which recommends the minimum support price (MSP) for crops on the basis of input costs — will be examined by the EAC due to the divergent views of state governments, Finance Minister P. Chidambaram told reporters after a meeting of the Cabinet Committee on Economic Affairs.

The committee has, however, decided to fix an ad hoc purchase price of Rs 850 per quintal, an increase of Rs 105 per quintal. The CACP had recommended raising the MSP for key kharif crops — sown between June and September — by nearly 30 per cent. In case of the common variety of paddy, it had recommended raising the MSP to Rs 1,000 per quintal from Rs 745 fixed for the previous season.

The recommended increase in public procurement prices had also triggered concerns that it could fuel the already-high inflation rate. “Certainly, the fact that prices are high in the retail was also taken into consideration,” Chidambaram said, adding that an increase from Rs 745 to Rs 1,000 would be too sharp.

The government ensured that the move to put off a decision on the CACP-recommended hike did not expose it to criticism from the Opposition. Chidambaram listed out some of the states that had opposed the substantial hikes for paddy, most of which were ruled by the BJP or its allies.

Gujarat, Madhya Pradesh and Orissa wanted the paddy MSP to be Rs 850, Chhattisgarh did not want a hike, while Himachal Pradesh wanted the procurement price to be lowered to Rs 645 per quintal. Left-ruled West Bengal and Kerala did not respond to the central request for its opinion and Congress-ruled Goa wanted the MSP to be fixed at Rs 900.

The Manmohan Singh government has underscored the need to give farmers better prices to encourage them to raise food production but there seems to be a view that the CACP recommended procurement price might be too high.

MSP for paddy went up by Rs 60 during 1999-2003 when the BJP-led coalition was in power, and by Rs 195 per quintal in the last four years.